ASC Value: How Important Are CON, Out-of-Network Opportunities?

Jessica Nantz, President of Outpatient Healthcare Strategies, discusses the importance of the certificate of need and out-of-network opportunities to the value of an ambulatory surgery center.

Jessica Nantz: If an ASC derives a significant portion of its revenue from delivering out-of-network care, prospective buyers are likely to view this as a red flag. Over the past several years, payers have taken steps to and added requirements that make it more difficult to receive payment when delivering out-of-network care. This has made the out-of-network model more risky and unstable when compared to the in-network model, which provides greater predictability around pricing and reimbursement.

A number of insurance companies have filed significant lawsuits against providers on the basis that out-of-network physicians are overcharging the insurer. While most ASCs employ an out-of-network strategy when first developed because of the inability to contract with payers and the need to have cash flow, when it comes to selling a portion of the equity to either a hospital or management company, they value the in-network reimbursement.

There is a higher risk and unpredictability that comes with relying on out-of-network patients for a significant portion of an ASC's revenue will usually make the ASC less appealing — and thus less valuable — to prospective buyers.

Applying for a CON is often a lengthy process, and one that is frequently unsuccessful, depending upon the state. If a health system or management and development company is interested in establishing or expanding a foothold in a CON state, acquiring an ASC that already has the CON will make this undertaking easier and faster.

In addition, the CON process often makes it more difficult for competition to open a new facility, which gives a facility with a CON a better chance to maintain control of a market. These factors can help add value to an ASC that has already gone through the CON process successfully.